REFINED FUTURE. Aluminium revival a big bonus {P3}

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1 BOOM, BUT NO BUST Mobile workforce avoids past mistakes {P2} REFINED FUTURE Aluminium revival a big bonus {P3} MAKING OF A COLOSSUS How a fishing village became an industrial giant {P6} GLADSTONE SPECIAL R EPORT SEPTEMBER 15, 2014 Some pain for lots of gain Region s latest boom is ending but there will be long-term benefits BARRY FITZGERALD COMMENT CRUNCH TIME FOR THE GREAT GAS GATEWAY Three huge LNG plants are nearing completion and the owners are confident they will be built on time MATT CHAMBERS IT S crunch time at Gladstone s Curtis Island, which is to be the gateway to exports for Queensland s vast coal-seam gas reserves. CSG has now entered the first of three giant LNG plants being built on the island in preparation for the unprecedented start-up up of six LNG trains over two years that will at least triple the gas demand of the nation s eastern states. Not only is the rapid six-train ramp-up unprecedented, the large-scale export of CSG, which has the complexity of requiring thousands of onshore gas wells, is also a first. And on top of all of the individual project challenges, five of the world s previous seven LNG plants have been late, according to Credit Suisse. All in all, if Bechtel, the US contractor building all three projects, can get the plants going on time (and the proponents can muster all the gas they need to feed them with) it will be a remarkable feat. There is little we can sensibly say about what could, or could not, go wrong on Gladstone LNG execution, Credit Suisse analyst Mark Samter said. Sitting here at this stage on (delayed projects) Angola, Pluto, Yemen, etc, it was impossible to forecast what would go wrong, however, the statistics don t lie and LNG projects have a nasty habit of being late and going over budget. The lead project is BG Group s $US20 billion (21.5bn) Queensland Curtis LNG, which is aiming for first LNG exports at the end of this year. Last month, Santos and Origin Energy, which are running the two other projects, both said they were on track and feeling good about their chances to hit 2015 first production targets. We ve made extremely good progress on Curtis Island, Santos chief David Knox, who is building the $US18.5bn Gladstone LNG project, said. I have every expectation that we will go forward and we ll be delivering our first cargoes in Santos said its first LNG train was 85 per cent, while Origin said its project was about 80 per cent. Part of the optimism last month was based on the settlement of industrial action on Curtis Island, where there are 13,000 people working to finish the projects. After unions demanded threeweeks-on, one-week-off, rosters (down from four-weeks-on ones currently used) members of four unions instead settled for increased pay and bonuses in an August 15 vote. Work on the project has returned to normal construction activity since the vote was accepted and we have a very busy end to the year with the construction of Queensland s first LNG production facilities, a Bechtel spokesman said. Origin Energy chief Grant King said the enterprise bargaining agreement had been one of the biggest risks to the schedule and budget for the $25bn Australian Pacific LNG plant his company is building with US major Conoco- Phillips. APLNG remains on track for first LNG production in mid-2015 and the approval of the EBA by unions on Curtis Island removes one of the significant risks, Mr King said. So the risks, in our view, continue to diminish around delivery, he said. I think that reflects that the Australian workforce can get behind these projects and make sure they work effectively. Getting LNG plants going on time is not impossible. Exxon Mobil proved as much this year when it brought the $US19bn Papua New Guinea LNG plant on three months early. The scale of what is happening on Curtis Island is hard to fathom, even in an industrial town like Gladstone. For US construction giant Bechtel, which is building about half the world s under-construction LNG capacity, Curtis Island is the biggest LNG project it has. The $70bn worth of plants and associated gas production are being designed to produce 25.3 million tonnes of LNG per year in massive freezers that cool the gas to minus 161C, shrinking it to 1/600th of its size ready for export to Asia. The export revenue, if the international oil prices LNG cargoes are linked to stay around $US100 a barrel, could be $US17bn a year. MUCH can be made of the pain Gladstone will have to go through as the $70 billion investment splurge on making it the export point for not one, not two, but three world-class LNG projects comes to an end. But as similar investment booms in Gladstone s past have demonstrated, the long-term benefits of such episodes can comfortably outweigh the shortterm pain from the inevitable adjustments required when the spending stops. It is better to have had the (LNG) boom than no boom at all. Gladstone got its start based on two bequests from nature a natural harbour adjacent to extensive coal deposits in the hinterland. Then came the establishment and growth of coal export facilities and the Queensland Alumina refinery that value-added coal and bauxite to produce alumina, a business that attracted international interest with Russia s Rusal investment. The coal available in the region also became central to power generation for the Queensland grid following the construction of the Gladstone Power Station. Since they were established, the coal export and alumina industries have grown, along with the development of associated rail, downstream aluminium smelting, cement manufacture, and other mining-related chemical industries. These so called old economy industries are still contributing to the growth of Gladstone. The second stage of Rio Tinto Alcan s Yarwun alumina refinery was only completed in 2012, and stage 1 of the Wiggins Island coal terminal is currently under construction, with further expansion possible as the coal market demands. By the end of the year, the export of LNG will be added to Gladstone s impressive industrial and processing base. Continued on Page2 TRANSIT SYSTEMS IS PROUD TO PROVIDE ENVIRONMENTALLY FRIENDLY TRANSPORT SOLUTIONS TO THE LNG PROJECTS IN GLADSTONE. 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2 2 SPECIAL REPORT GLADSTONE No boom and bust traps here As gas projects move into production, there is a sense economic activity will continue at a good pace DEREK PARKER OUTLOOK GLADSTONE may have the look of a boom town but there is a strong drive in the community to avoid the boom and bust cycle that has been the fate of many resources-based regional centres. We have long been aware of this problem and we are working hard to not fall into that trap, says Gladstone Industry Leadership Group chief executive Kurt Heidecker. The group comprises Boyne Smelters, Cement Australia, NRG Gladstone Operating Services, Queensland Alumina and Rio Tinto Alcan Yarwun. There are major advantages in that Gladstone was a solid community before the gas developments, and that Gladstone has welcomed waves of major new industries over several decades. Some people might equate Gladstone with West Australian mining towns like Karratha or Mount Tom Price, but that is a misconception. In the recent period of growth, our culture has provided stability and certainty for companies and people. Heidecker says more than 80 per cent of GILG member companies employees have been recruited from the local region. The remaining 20 per cent are recruited from elsewhere and tend to have skills that are in great demand, so they need to be attracted to live in Gladstone. A recurring theme I have heard is that people initially came to Gladstone for the employment, either in a GILG member company or a related area, but choose to stay for the lifestyle, he says. I was one of the people who came here on that basis. I originally came here for a four-month contract, and that was six years ago. Now, I can see no reason to live anywhere else. A lot of people name the outdoor living, beaches, the family friendly community, and the choice of housing styles as reasons why they wanted to be locals. They did not want to be fly-in, fly-out people the FIFO employees that are associated with many resource projects. Instead, they want to be what I call LILOs, of live locals. For the workers who do not live Gladstone Industry Leadership Group chief executive Kurt Heidecker says the city prepared for a future without big numbers of construction workers in Gladstone, a substantial industry of accommodation and services has developed. In particular, Homeground Villages has developed a reputation for offering amenities more commonly associated with international-class hotels than with temporary worker accommodation. As Heidecker sees it, this is part of the process of attracting the high-skill people needed for the new developments. According to figures from Queensland s Office of Economic and Statistical Research, the median income in Gladstone is nearly 20 per cent higher than the rest of Queensland and Australia. Australian Bureau of Statistics data shows the proportion of the workforce in manufacturing (including industry) and construction sectors that usually provide healthy incomes is considerably higher there than elsewhere in the country. And the number of people in the manufacturing sector is growing in Gladstone, while it is falling in most other places. While the gas projects are moving out of the construction phase there is a sense that economic activity is likely to continue at a good pace, albeit slightly reduced. Significantly, the age profile of Gladstone is younger than most places in Australia, with a greater proportion of people in the 30 to 60 bracket, as well as in the under-19 group. Generally, people aged between 30 and 60 have the level of experience preferred by employers to fill Gladstone s above-average number of roles in the industry or construction sectors, says Heidecker. For many people in the first half of this group, this is also the time when they may decide to have children, and their higher income also means that they have fewer financial obstacles to that. This means demand for a range of services, resulting in an economy with a broad base, rather than one based heavily on resources. We are reaching critical mass. At the same time, we are seeing a lot of investment in training and educational infrastructure, with companies co-operating with schools to develop innovative programs. That means an ongoing skills base, and that s a good sign for the future. Some pain for lots of gain Continued from Page 1 AUSE01Z01FB - V1 And like the others, LNG represents a diversification for Gladstone, as well as offering future potential expansion possibilities. Yes, housing prices and rentals doubled during the peak construction phase of the LNG projects, causing the general population some real pain. And existing local businesses were hit by high turnovers from the defection of skilled employees to the much higher wages on offer out on Curtis Island. But the Gladstone bubble is now deflating as the LNG plants move to first production and their construction workforces wind down. Motel prices are down 40 per cent from prices two years ago, and the real estate and rental peaks of 2010 and 2011 have passed. Is Gladstone headed for an extended slump? Probably not, thanks to that diversity of its industrial and processing base mentioned earlier. And what pain there must be can be eased by more government spending on social infrastructure to bridge the gap between the end of LNG project construction, and the next leg of investment in Gladstone s long history of growth. The next leg is likely to see an expansion of the LNG export capability. But don t forget Gladstone s role as a major coal exporter to an energy-hungry Asia, or the strong growth in alumina/aluminium demand to come from the light weighting of the world s transport fleet. Gladstone s diversity is its strength. Editor: Terry Conroy Custom Publishing Manager: Jon Fox (02) jon.fox@news.com.au if you can t be at home be at Homeground Homeground Gladstone sets a new standard in workforce accommodation. With personalised service, all inclusive meals, crisp white linen and queen sized beds, why would you stay anywhere else while working in Gladstone? Boasting 1,392 four-star rooms that feature all the amenities you would find at a hotel including foxtel, flat screens, air conditioning and queen size beds. Recreational facilities such as a gym, personal trainers, a swimming pool and a tavern. Convenient location only 20km from Gladstone and town. A minimum of 2 nights is required per booking. To view more please visit our website located at or call (07) HGRO18068

3 V1 - AUSE01Z01FB GLADSTONE SPECIAL REPORT 3 Alumina revival s big bonus Business visitors to Gladstone and the southern Barrier Reef are staying for an average 3.7 nights a visit LYNDON MECHIELSEN Hotel chief maintains faith with city LISA ALLEN THE recently opened $41 million Oaks Grand Gladstone in Central Queensland was planned just as Australia s mining boom was heating up several years ago. Nevertheless, Oaks Australia chief executive Brett Pointon says the 4.5 star 144-room property, arguably the most luxurious tourist development in the Queensland city, which is underpinned by its mining, mineral resources and energy industries, has performed well since opening in April even though there has been a marked softening in the mining sector. When we put it together the environment was a lot hotter, Pointon tells The Australian. Gladstone is still a good destination (but) the room rates have come off a little, it is cyclic, he says. We still have faith in the region with our average room rate sitting around $160 a night at The Oaks Grand Gladstone, (but) when we were doing feasibilities it was $210 a night. However, The Oaks Grand Gladstone is reporting healthy occupancies of nearly 80 per cent and is one of several serviced apartment complexes its Thai owner, Minor International, is developing in Australian mining centres such as Mackay. Latest Tourism Queensland figures show business visitors to the southern Great Barrier Reef, which includes Gladstone, rose 6 per cent in the year to March However, domestic visitors fell 13.6 per cent for the year as the domestic tourism softened. International visitors to the southern Great Barrier Reef also slumped 15.5 per cent due to a softer New Zealand and US holiday market. While international business travel declined, there was an increase in travel from smaller European markets such as France and the Netherlands according to Tourism Queensland, which noted business visitors to the region are staying longer than last year, averaging 3.7 nights a visit. Pointon says the two restaurants attached to The Oaks Grand Gladstone, Ribs and Rumps and Coffee Club, are performing exceptionally well for their Bangkok-based owner. The Oaks Grand Gladstone is one of few properties wholly owned by Oaks in Australia, which in turn is held by Minor. When you have a mining boom, you have a lot of infrastructure work being done, says Pointon. But when you have a mining sector slowdown, as a result of that, people are not travelling. You see that in Perth and Brisbane, they are not as strong as they were a couple of years ago. You see it in demand when there is not demand, there are not the (big) room rates. But Pointon says Gladstone s LNG industry is still strong, and there is still a lot of money being spent. There is still a lot of money in the Gladstone region, we have a lot of confidence in the region. Over the next two years we will see Gladstone coming back, Pointon foreshadows. We are seeing a bit of movement with the major mining companies. Minor diversified out of Thailand after the Asian crisis hit in The company was founded by US businessman Bill Heinecke in 1978 and listed on the Thai Stock Exchange 10 years later. Lisa Allen travelled to Gladstone as a guest of Minor. NORTHERN OIL REFINERY ROBIN BROMBY WHILE all eyes might be on the huge liquefied natural gas projects being developed on Curtis Island and the $70 billion investment involved, Gladstone can take comfort in one other development: the revival of the aluminium sector. Huge global stockpiles (estimated at about 10 million tonnes) along with Chinese expansions underpinned by subsidised electricity and the discovery of billions of tonnes of coal in Xinjiang province have thrown a shadow over the global industry in recent years. Some analysts have even predicted China would become self-sufficient, leading to the shutting of smelters in other parts of the world. Add to the Chinese expansion Australia s high-cost environment, especially for energyintensive smelting (aluminium not for nothing being known as congealed electricity ). Two Australian aluminium smelters have closed in recent times. Throw in, over the past year or so, the high Australian dollar and increased raw material costs along with the federal government s renewal energy target (the RET costs the Gladstone aluminium smelter $25 million a year), and it is not surprising the industry has been feeling the pinch. Aluminium prices got to around $US2830 a tonne just before the global financial crisis hit in 2008, bottomed out at around $US1765 a tonne at the start of 2014, but by early this month were around $US2100 a tonne, a 17 per cent improvement for the year so far. The worst it seems is past important for Gladstone seeing it is home to two alumina smelters, one aluminium smelter and a power station supplying them. Recently Reuters reported the global aluminium industry was facing its rosiest outlook in years, with Russian giant Rusal returning to profit after five quarters in the red. The Russians are now predicting a global deficit of 1.5 million tonnes this year. (Much of the huge stockpiles in warehouses around the world are locked in financing deals and not available for physical delivery to aluminium users.) Gladstone s aluminium industry is dominated by global mining giant Rio Tinto. It fully owns the Yarwun aluminium smelter, holds a 38 per cent interest in the Queensland Alumina plant, 59 per cent in the Boyne Island aluminium smelter and 42 per cent of the Gladstone power station. Yarwun is 10km northwest of Gladstone. The first shipment of alumina aluminium ore derived from bauxite mined at Weipa left the refinery in The plant s output has doubled to 3.4 million tonnes a year. As this was written, Yarwun was going through one of its annual shutdowns. Production is expected to reach full capacity by late next year as upgrades are made throughout the plant. Yarwun was the first greenfields alumina plant to be built in the West since the early 1980s. But Queensland Alumina s operation the world s largest alumina refinery dates back to the 1960s. In 1982 the aluminium smelter on Boyne Island, 20km south of Gladstone, was commissioned. Boyne Island is Australia s largest aluminium refinery, turning out more than 570,000 tonnes a year and directly employing about 1000 people (and indirectly another 3000 in the Gladstone region). Rio Tinto also likes to talk about its contribution to the Gladstone economy. In 2013, Yarwun and Queensland Alumina spent $1.3 billion on wages and payments to local suppliers. In 2002, the company launched the Rio Tinto Alcan Community Fund. So far it has worked with 54 local organisations and come up with more than $4.5m. In 2008, the fund kicked off a study to peer into the future and try to figure Gladstone s needs over the following 20 years; one of the main challenges that needed addressing was the city s shortage of childcare places, making it difficult to attract people to Gladstone and retain them. The fund has since helped establish 125 new childcare places. BURNING IS NOT RECYCLING 350 million litres of waste lube oil is collected in Australia every year. 84% is burned and our governments classify that as recycling! We don t agree. We have a better, environmental solution. 6RZHpYHLQYHVWHGPLOOLRQWREXLOG$XVWUDOLDpVPRVWHQYLURQPHQWDOO\VRXQGUHUHÛQHU\ 7KH1RUWKHUQ2LO5HÛQHU\ZLOOUHUHÛQHXSWRPLOOLRQOLWUHVRIZDVWHOXEHRLOHYHU\\HDU :HFRQYHUWZDVWHOXEHRLOLQWRFOHDQEDVHOXEHRLOIRUXVHLQWUDQVSRUWPLQLQJDQGDJULFXOWXUH We turn this Into this :HUHFRYHUSHUFHQWRIWKHOXEHRLOFRPSRQHQWRIWKHZDVWHRLOFUHDWLQJDQHDUSHUSHWXDO F\FOHRIXVHDQGUHXVH We produce no waste. $WIXOORSHUDWLRQDOFDSDFLW\WKH1RUWKHUQ2LO5HÛQHU\ZLOOUHGXFH$XVWUDOLDpVJUHHQKRXVHJDV HPLVVLRQVE\PRUHWKDQWRQQHVHYHU\\HDU 7KH1RUWKHUQ2LO5HÛQHU\ZLOOFROOHFWDQGWUDQVSRUWZDVWHOXEHRLOIURPWKURXJKRXW $XVWUDOLDDWQRDGGLWLRQDOFRVWWRWKHZDVWHRLOJHQHUDWRU If you want to be part of the environmental benchmark in recycling, call STEVE RYAN A worker inside the Curtis Island gas pipeline tunnel

4 4 SPECIAL REPORT GLADSTONE Three-pronged future for powerhouse There s enough upside in the city to ride out its fluctuating fortunes ROBIN BROMBY BOOM or Bust was the title of a report out this year measuring sentiment among Gladstone s business people. Even without the question mark, the title reflects the ambivalence among the people of this Queensland port city to the $70 billion liquefied natural gas industry being developed on nearby Curtis Island. Fortunately, the local leaders are confident there won t be a bust but certainly Gladstone will for years be a case study of how a city adjusted to, first, thousands of workers flooding into the place and, second, to their flooding out again already home rentals have taken a significant dive while one real estate commentator has recently unloaded on what he calls idiot developers. And it is not as if the warning signs have not been there. In February, the local Gladstone Observer headlined: 2000 Curtis Island jobs to go by end of the year: Bechtel At the centre of all this is LNG. You just have to look at the figures. The Australia Pacific LNG plant (being built by Origin Energy, Conoco Phillips and China s Sinopec) has provided employment during the construction phase for about 3300 people. Once operating, it will take just 140 people to run the plant. The same comparative figures apply to the Gladstone LNG project (Santos, Petronas, Total and KOGAS) and the project being undertaken by the BG Group. The port s new coal terminal is 90 per cent complete; at the peak of construction there were 1100 jobs involved. However, there is a plus for Gladstone: it doesn t have all its Coal being shipped out of the busy harbour is expected to remain a big-ticket item for the city s economy apples in the LNG basket. There s an aluminium industry, for example. Coal being shipped out of the port is another big-ticket item. Tourism is a growing factor in the Gladstone economy. And there s farming over in the hinterland. And, of course, that LNG industry will sustain both a sizeable service industry and mean a constant queue of LNG bulk carriers in the harbour. Anyway, about 60 per cent of workers employed on the LNG projects were fly-in, fly-out staff, so the ending of their contracts will have only marginal impact on the city. And there were the people that we never expected to stay, such as the big team of specialist welders brought in from Ireland for the duration of the construction phase. So this is no gold rush town which, when the gold has all been mined out, becomes a ghost town. The people of Gladstone were well aware that the boom phase had a limited time frame. They have always known that there would be an end to it, says Gladstone mayor Gail Sellers. It has been a fast run-up, though. Growth rates have just peaked at 4.2 per cent, the top expansion recorded in Queensland last year. Said Mayor Sellers: The area cannot sustain that sort of growth. Rental housing vacancies at one stage went below 1 per cent and the Gladstone Regional Council was faced with enormous pressures being placed on its roads and social services. The last significant study of the economy was the 2010 Prosperity 2030: Gladstone Regional Economic Development Strategy report. By contrast with what is now under way in the form of LNG plants, four years ago only 2 per cent of businesses in Gladstone employed more than 100 people. The gross regional product was $2.4 billion, below the Queensland average while unemployment was higher than the state average. Manufacturing was, however, the largest sector about 20 per cent of the economy with construction and retail accounting for around 11 per cent each. The Gladstone region was lagging the state average for the proportions of people employed in health and community services. In 2010, the estimated population of the region was 58,000 (of whom two-thirds live in Gladstone city). It was up to just under 64,000 at the end of last year and in the 2010 study the projection for 2031 was that the region would be home to 98,000 people; the latest estimates put the 2031 population at 108,600 and 2036 at 121,266. But there have been plenty of growing pains. While the tourism industry has been given a boost by P & O deciding to include Gladstone on its cruise call list (six cruise liner visits a year from 2016), QantasLink recently scrapped direct flights to Sydney due to poor passenger numbers. Gladstone does face a challenge. Last month the Australian Manufacturing Workers Union called on the Queensland government to help cushion the effect of a sudden exodus of some 8000 workers as the Curtis Island LNG projects come to an end. As for business generally, the Boom or Bust Gladstone Region Business Study headed by the town s chamber of commerce and industry revealed the concerns of local business people. To the question of which were the biggest issues that local companies were facing, the leading answer was staff issues. The big money on Curtis Island was enough of a draw to have plenty of locals quitting their jobs for construction work with salaries in the six figures. Gladstone Regional Council experienced staff turnover up to 25 per cent. Large numbers of council staffers were among those taking the big money while it lasted. The next biggest concern? Decrease in work, a sign the economy has turned down. High costs came in at No 3. The report highlighted comments from company owners. Small business complained about ballooning expenses due to excessive wages and rent while shop owners could not find enough quality people who wanted to work in the retail sector. The local construction owners reported that work had dropped off dramatically while the services people complained that the big projects were using out-of-town professional technical companies instead of local ones. Ms Sellers argues that Gladstone will ride out the challenges, saying it has a much more diversified economy than some other AUSE01Z01FB - V1 parts of Queensland, citing Mackay which has just the two main pillars of coal and mining, Just recently a company opened in Gladstone whose business it is to recycle oil. It took on 30 staff. A big source of business will be the maintenance shutdowns of the LNG plants, and there will be this service work all year round. The port had expanded, with new tugs ordered. Coal would be shipped out in increasing quantities. The aluminium industry was a big employer. Tourism would have to expand to cater for the cruise ships, including industry tours. The council was looking to boost agriculture, including shipping beef cattle out through the port. There were even plans to revive live coral exports. Ms Sellers said 2015 growth might not match last year s, but it would still be one of the highest in Queensland. Mayor Gail Sellers believes a diversified economy can ride out the challenges

5 V1 - AUSE01Z01FB The good oil on recycling: turn old into new GLADSTONE SPECIAL REPORT 5 Sustainable boats for a fragile ecosystem There are many benefits in re-refining waste DEREK PARKER ENVIRONMENT AT Yarwun, near Gladstone, a new plant is taking key steps towards a better environment and improved self-sufficiency in oil for Australia, by turning a used product into a new one. The Northern Oil Refinery collects waste oil and re-refines it, a huge improvement over the alternative of simply burning it, either in Australia or overseas. It s win-win, as far as we can see, says Tim Rose, managing director of Southern Oil Refinery, which joined with waste disposal firm JJ Richards & Sons to create Northern Oil Refinery. We collect the waste oil from a customer s site, at no cost to them. We are currently re-refining about 40 million litres a year, which would make a lot of greenhouse gas if it was burned, he said. The $55 million plant commenced operations in February. It is the first in Queensland, although the parent company has a facility in Wagga Wagga. The location was chosen, says Rose, because of its proximity to a number of mines and other industries that produce large quantities of waste oil. There was encouragement from the state government, which helped in site selection. We were also very impressed Tim Rose, right, with Enivornment Minister Andrew Powell It s win-win, as far as we can see TIM ROSE MANAGING DIRECTOR OF SOUTHERN OIL REFINERY by the pro-business culture of Gladstone, Rose says. They welcome new industries and firms, and they understand that it means jobs and investment. They get it. The re-refining process uses vacuum distillation, which involves heating the oil to a range of high temperatures, then recondensing it. The result is a base oil that is then sold to firms that combine it with additives to make new products. The main contaminants of the waste oil are petrol and diesel, which are recovered and sold, either for fuel or as components for products such as asphalt. This is recycling in the true sense, and we re proud of what we do, says Rose. Unfortunately, the regulatory agency in Canberra uses a definition of recycling of waste oil that allows for burning it, which most people would see as the wrong way to go. Rose sees plenty of room for growth, with several mining developments now moving into the production phase and some new developments in planning stages. He says defence planners have taken an interest, from a selfsufficiency perspective. We re operating at about 40 per cent capacity at present, and we think that this will rise to over 55 per cent by this time next year, he says. There is huge potential. If all of Australia s collected waste oil was re-refined instead of burned, greenhouse gas emissions would be reduced by about a million tonnes per year. That s a big number by any standard. Transit Systems high-speed paramedic ferry can carry more people than a helicopter should the need arise DEREK PARKER TRANSPORT LOOK across the shining Gladstone harbour on any given day and you are likely to see a hi-tech, super-streamlined Enviro Cat ferry skimming across the water, providing the crucial conduit of people and supplies for the Curtis Island LNG projects. Each ferry can carry up to 400 passengers, although Clint Feuerherdt, chief of Transit Systems, the company that designed and oper- ates the six ferries and other boats, emphasises that the operation is not only about moving people. We are very proud of what we have achieved here, he says. And we are especially pleased that we have been able to do it while setting new standards of environmental protection and safety. He points out that the ferries are the second generation of sustainable boat design by Transit Systems. The original Eco Jet Cruiser was purpose designed by Transit Systems, with the Austra- lian Maritime College, the Queensland government and One2Three Naval Architects. They were designed to operate in the fragile Moreton Bay waterways, and it was the combination of environmental sensitivity and transport effectiveness that attracted the initial interest for the water-bound LNG projects. The vessels were built in Brisbane, with the fleet growing to include specialist transport boats. There is also a high-speed paramedic ferry, based on Curtis Island, which is entirely compatible with Queensland Ambulance Service vehicles and can carry more people than a helicopter, should the need arise. Gladstone harbour is a fragile ecosystem, with dugongs, turtles and marine life, Feuerherdt says. The vessels are jet propelled, so there are no propellers or other protrusions that could damage marine life. The hull of the ferry is designed to have minimal impact in the water, with less wash that can damage seagrass beds and the foreshore. And they use less fuel per passenger than a small four- Building nations takes world-class expertise Fund a new future with NAB. Our deep experience in Infrastructure, Energy & Utilities and Natural Resources has created a strong foundation for our nation s growth. And our project finance, asset finance and export credit agency expertise enables you to build for tomorrow. To find out more contact Richard Cooper, General Manager, Project & Infrastructure Finance on or visit nab.com.au/specialisedfinance 2014 National Australia Bank Limited ABN AFSL and Australian Credit Licence A SBPJ906 cylinder car, with no pollution and no overboard liquid discharges. Feuerherdt is also proud of the ferries berthing facility, a concrete floating dock. It has been shown to enhance the habitat for local marine life, and there is reduced risk of the leeching often seen in traditional concrete piles and treated timber. These vessels and facilities are state of the art, says Feuerherd. As they should be. In a place like this, you have to be proactive in environmental initiatives as well as getting the job done.

6 6 SPECIAL REPORT GLADSTONE City shrugs off irrational exuberance Accommodation returns to affordable levels after a boom-time peak GEOFF HISCOCK TWO years ago, Gladstone was the epicentre of irrational exuberance in Queensland s regional property scene. As construction workers chased high-paying jobs on three LNG projects and a new coal terminal, the city s median house price soared briefly to $600,000 and weekly rents rose in tandem. That peak has passed, thanks to a rapid build-up of houses and units in response to the demand, supplemented by purpose-built workers camps on the Curtis Island LNG precinct across the harbour from the city centre. Today, Gladstone s median house price is down to $430,000 and weekly rent for a three-bedroom house is running at about $440, according to the latest property report. That may be causing pain to some property investors, but otherwise the outlook is rosy for the 64,000 people living in the Gladstone Regional Council area. Gladstone Industry Leadership Group (GILG) chief executive Kurt Heidecker says that after the intense activity of recent years, it will be good for the city to resume its role as a major industrial hub with one of the state s most diversified economies covering resources, manufacturing, agriculture, services and tourism. We ve had 14,000 people working six days a week for three years on LNG projects, Heidecker said. Now it is coming back to normal, and that will require some adjusting of expectations. The three big LNG processing plants are nearing their operational phase, starting with BG s Queensland Curtis LNG this year, and followed next year by the Santos-led Gladstone LNG and the Origin-ConocoPhillips Australia Pacific LNG projects. To feed these plants, coal-seam gas from southwest Queensland s Bowen and Surat basins will be piped more than 400km to Curtis Island, where it will be frozen and exported to Asia as LNG. The LNG plants combined capacity of 25.3 million tonnes a year potentially will add $15 billion a year in export value by Gladstone-born mayor Gail Sellers, 61, has spent most of her life in the city and is predictably bullish about its future. This is a fantastic, vibrant place to live, she told The Australian. She dates the city s first big transformative event to the mid-1960s and the start of the Queensland Alumina operation that brought in people from all around the world. But the LNG era is definitely the biggest in terms of its impact on the community, she said. Heidecker concurs. We ve had major projects in every decade since the 1960s, he said. However, the scale of the LNG is so much bigger 10 times that of the first alumina development. While there are many positives our kids have a great future, unemployment is low and our growth rate is the highest in the state Sellers acknowledges that the LNG-related construction spurt put stresses on the city and its people. In particular, accommodation was stretched, she said. Rents went up, housing prices went up. It was the sheer volume of extra people, the road traffic, the fact you couldn t book a motel room or an airline ticket. Gladstone s population growth is fastest in the key age bracket the people who spend most on housing, children, education, entertainment, cars, boats and the other necessities of life in a coastal city that is the southern gateway to the Great Barrier Reef. They work in industries such as manufacturing and mining Gladstone is the world s fifth largest coal export port, with annual throughput of about 70 million tons per annum (MTPA) and in alumina refining and aluminium smelting at Rio Tinto s Yarwun, South Trees and Boyne Island plants near the city. Gladstone s 1680 MW coal-fired power station is another key employer, as is Australia s largest cement plant, operated by Queensland Cement at Fisherman s Landing. Many of the more recent jobs have been in the construction and transport sector, associated with the new Wiggins Island coal terminal and the Curtis Island LNG precinct. Gladstone Ports Corporation (GPC) chief executive Craig Doyle says $40 billion of new investment in port-related infrastructure and resource processing industries since the late 1990s has seen total trade through the port soar to almost 100 million tonnes a year in , with 145 MTPA expected within three years. Gladstone is the world s fifth largest coal export port, The Wiggins Island coal terminal will open later this year The port of Gladstone is on track to be Australia s largest multi-cargo port by the end of the decade, he said. Doyle believes more opportunities to grow bulk and specialised commodity trade, along with container trade, could open up if there were better road and rail links from outside the region to Gladstone. In the view of some observers, the downside of this industrial buzz is the environmental impact on air and water quality, marine habitat and the fishing and crabbing industries. Nitrogen dioxide emissions from the power station and dust from the coal terminals, alumina refineries and other sources help create a sometimes-visible brown haze over the city. Conservationists worry about industrial run-off, harbour dredging and the impact increased shipping from the coal and LNG trade might have on the reef. Sellers says these concerns are unfounded and that any of Gladstone s air or water quality problems have been resolved. If you look at the EPA (Environmental Protection Authority) website, we are the most researched and documented city in the world. If we have a problem, we fix it. Heidecker says that Gladstone s air quality is far better than you find in the CBD of Sydney or Brisbane. Sometimes the haze can be unsightly but it has minimal impact on our health. Earlier this year, an independent review of a bund wall built to handle dredging of Gladstone harbour s western basin in found aspects of its design and construction were not consistent with industry best practice. As well, the panel found a low level of public confidence in the monitoring and reporting regime for the project. Doyle says environmental protection is among GPC s highest priorities and that it took some key learnings from the western basin project in terms of addressing community concerns. We will incorporate the lessons learned... to implement best practice for future port development projects, he said. In its early days, the port handled live horse exports, followed by cattle and other primary products. The first coal was shipped in 1925, but it was not until the mid-1950s that the bulk coal trade began to develop. It was spurred along in the 1960s by the development of the Bowen Basin coalfields, and the decision by Thiess Peabody Mitsui to rail coal from Moura to Gladstone for shipment LYNDON MECHIELSEN to Japan. In the late 1970s BHP secured long-term contracts to supply coking coal to the Japanese steel mills, enabling the building of what is now the RG Tanna Coal Terminal. Today, the terminal handles 70 million tonnes a year of coal. At nearby Wiggins Island, another coal terminal is expected to begin operating later this year with initial capacity of 27 MTPA. Rio Tinto has a substantial Gladstone presence, through its alumina and aluminium business and its 42 per cent stake in the power station. It owns 80 per cent of Queensland Alumina, which opened the first alumina refinery at Parsons Point in 1967, growing it eventually to almost 4 MTPA. Rio Tinto Alcan opened the Yarwun alumina refinery in 2005 and expanded it in 2012 to 3.4 MTPA. The 545,000 tonne Boyne Island aluminium smelter opened in 1982 and is owned 60 per cent by Rio Tinto with the balance held by Japanese interests. Ups and downs of area Cook missed GEOFF HISCOCK GLADSTONE is no stranger to ups and downs. In 1846, British colonial secretary William Gladstone had high hopes a distant Australian harbour then known as Port Curtis would make a suitable capital for a new colony of North Australia. The scheme started with a small convict settlement in January, 1847, under Colonel George Barney, but their presence was short-lived and Gladstone s North Australia concept did not survive a change of government in London. Still, there was continued interest in the area during the 1850s, and by 1863, Port Curtis had grown into a coastal municipality known as Gladstone. Port Curtis is a very difficult harbour for shipping to enter JOHN OXLEY SURVEYOR-GENERAL The new town had a natural harbour, though the first Europeans to land nearby Captain Cook and his party in 1770 at Bustard Bay to the south had missed the entrance. This part of the east coast had been passed in the night by Captain Cook so that both the openings escaped his notice and the discovery of the port fell to our lot, Matthew Flinders wrote of his August, 1802, exploration of the area he named Port Curtis. The northern entrance to Port Curtis is accessible only to boats, but ships of any size may enter the port by the southern opening, Flinders noted. The land around it was generally incapable of cultivation. In 1823, on instructions from the then-governor of New South Wales, Sir Thomas Brisbane, surveyor-general John Oxley explored the area as a potential site for a convict settlement, but found it wanting in arable land and water. Port Curtis is a very difficult harbour for shipping to enter, he reported. It would be another 62 years before the harbour s first wharf was built at Auckland Point in Don t have to dig far to see resources boom underpins Australia s economic resilience on the world stage Australians are reaping the benefits as mining delivers higher wages and more jobs ADAM CREIGHTON AUSTRALIA is undeniably better off because of the resource boom, and not only the companies doing the digging. More than any other factor, the boost to local confidence and economic activity stemming from the resource boom prevented the slumps in economic activity and confidence that resulted in massive increases in unemployment across the world. Even as the price of iron ore Australia s biggest export falls back to $US80, the boom continues to flood government coffers and household budgets with extra income. And the gas boom is only getting under way of $229 billion of committed resource projects as of April this year, $197bn were LNG or gas. Not only the workers in those industries benefit: the sustained surge in the Australian dollar against most other currencies has spread the benefit of the resource boom to every Australian, making imported goods and services much cheaper than they have been since the currency was floated in A recent analysis by the Reserve Bank concluded Australians incomes were about 13 per cent higher today than they would have otherwise been, and the unemployment rate currently 6.4 per cent 1.25 percentage points lower than it would otherwise be, equivalent to around 150,000 jobs. Having fallen down the ranks of rich countries in the 1970s and 1980s Australia is now comfortably among the top 10 richest nations in the world per capita, according to the online ranking compiled by the CIA. The mining boom represents one of the largest shocks to hit the Australian economy in generations (which has) substantially increased Australian living standards, the Reserve Bank authors said. Estimates of the total revenue windfall for governments vary. Consulting firm Macroeconomics last year estimated the resource boom between 2003 and 2016 would have delivered a $290 billion boost to the government s bottom line through higher corporate tax receipts, personal income tax payments and reductions in welfare payments. The Henry tax review proposed a controversial resource profit tax designed to tax profits beyond the point where they affected the incentive to miners to bother pursuing a particular project which later became the Minerals Resource Rent Tax of the Gillard government. It raised barely 5 per cent of its revenues and was abolished by the Coalition government in September. The boom has also had psychological impacts, good and bad. Having insulated Australia from a technical recession after the global financial crisis, the resource boom has inculcated a sense of hubris into policy makers and the electorate at large. After 23 years of uninterrupted economic growth, unique in the developed world, Australians sense of economic invincibility has undermined politicians ability to advocate reforms that might entail short-term pain for some, for longterm gain for all. No substantive tax reform has occurred for more than a decade, nor any major micro-economic reform. The sense of endless cash and entitlement has seen remuneration in the public sector spiral out of control, leaving a country supposedly founded on egalitarian principles with the most bloated and overpaid public sector teeming with unnecessary positions across advanced countries. While Australia s population is five times New Zealand s we have more than eight times as many public servants. Australia s great resource endowment has also instilled the idea we are resource independent. But Australia is more dependent on foreign oil, especially oil sourced from the Middle East, than it has been for a long time. Being a large exporter of commodities doesn t mean energy is cheaper, either. Domestic gas prices will continue to rise as they gravitate toward the global gas price (because export of gas is becoming easier). A recent study by manufacturing associations concluded as a result local manufacturing would contract by $18bn over the next seven years and shed almost 15,000 jobs, with especially large falls in Queensland, NSW and Victoria. The boom has led to a substantial appreciation of the Australian dollar that has weighed on other industries exposed to trade, such as manufacturing and agriculture, the Reserve Bank concluded in its study, noting the real exchange rate which takes into account local inflation had risen 44 per cent higher. The mining boom results in a substantial reduction in vacancy rates and rapidly rising rents, they added, suggesting that the boom had pushed up rents by 10 per cent by last year, compared with Australian governments, especially the federal government, have little to show from the resource boom, while Australians have become used to the luxury of very high wages, a very strong currency and welfare payments for households with incomes up to $150,000 a year. Partnerships for a stronger region. We re here for our community. Since 2002, the Rio Tinto Alcan Community Fund has supported community-based initiatives in the Gladstone region that make a difference. Programmes including Here for Childcare, Here for Growth and Here for Health deliver sustainable, long-term solutions in areas of community need. We believe that building knowledge and empowering key stakeholders to develop sustainable solutions, is one way that we can help. hereforgladstone.com.au